Wednesday, May 7. 2008

I remember not too long ago when Congress was mandating ethanol on all of us that I felt very alone when I started complaining that turning our food into fuel was not a very smart thing to do. That seemed to be a very unpopular view to be taking.

Even though ethanol has been the primary driver in our industry the last couple of years, the beef industry has always been on the outside looking in on the debate. It makes issues like BSE, country-of-origin labeling, industry consolidation and international trade seem trivial by comparison.

Initially, the argument seemed to be over whether ethanol made economic sense, the answer to which is obviously “no” or it wouldn’t require massive subsidization. So ethanol advocates argued that it might make sense down the road, which ethanol opponents couldn’t much refute. It seemed that ethanol’s support came from the no-harm, no-foul mentality – while it might not help, it’s preferable to pay U.S. farmers than sheiks in the Middle East.

The impact on the livestock industries and/or consumers was easily dismissed because most people miscalculated the size of ethanol’s economic impact. But regardless of whether you pick up the Wall Street Journal, Newsweek or USA Today, the storyline about ethanol has changed today.

It’s no longer simply about the golden era for grain producers but rather the huge costs of this policy on society in general. And the past week provided a prime example of how the rhetoric around ethanol is evolving.

Texas Gov. Rick Perry petitioned the Environmental Protection Agency for a 50% waiver from the federal renewable fuels standard (RFS) mandate for ethanol, in order to gain relief from higher food costs. The grain and ethanol industries responded that rising corn is only a small reason for the increase in food prices. That, of course, will always be the case if one looks at processed foods because the commodity inputs are such a small fraction of the cost.

It seems like more and more people are now questioning these mandates. I think that is wise. I am not saying that all the food price increase is due to corn prices rising due to ethanol, but it ain't helping. It just doesn't seem smart as a society to subsidize ethanol production which in part hurt the poorest consumers in the world with higher food prices. Will support for ethanol drop? I agree with the articles author on that point.

But cattlemen, don’t get too giddy over the prospect that the American people will demand, or our elected officials will act to re-establish, free-market capitalism and move away from buying the votes of one small constituency at the expense of a much larger one. Today’s politicians are weak-kneed when it comes to making the hard decisions. Politicians today no longer advocate the principles that led to our success, but pander unembarrassingly to the culture of consumption that believes there is no real cost as long as that cost can be put off until the next election cycle.

No end in sight to the problem since the politicians will just ignore it.

Friday, April 25. 2008

Everybody that reads here knows I am seriously concerned about turning our food into fuel as we presently are in the US with corn to ethanol. I just wanted to clarify my position on this. I have no problem with bio-fuels. I just don't think the government should be mandating ethanol use or subsidizing its use. If we are turning our food into fuel it should stand on our own without the government getting involved. I see the Gazette has couple of opinion pieces on this issue this morning.

I'm not going to beat a dead horse with my opinion on this issue as compared to those given. Both pieces give some accurate information and over blow or ignore other things to prove their point. Take them as you will. I know where I stand.

Thursday, March 13. 2008

I brought up the fact recently that a drought in the corn belt due to the La Nina currently in place could really affect the corn prices and affect the price of food for all of us. I got accused of only caring for this because of how it affects the beef market. I will admit that is my first thought but the amount of food in our supply chain that uses corn products like high fructose corn syrup and other components is staggering. Above and beyond that corn prices don't move by them selves in a vacuum. If corn prices go up so do the prices of other grains.

I'm getting a little off what I wanted to point out. Someone has analyzed this situation. Iowa State University economists Lihong McPhail and Bruce Babcock have an interesting report on the corn market that is summarized very nicely here.

With the prospect of a La Nina drought affecting 2008 production, a 113 bu. national yield (1988 style drought) would push corn prices to $6.42 and only 27% of the ethanol plants could operate and the ethanol production mandate would not be met. If the mandate was enforced (Energy Independence and Security Act), corn prices would reach $7.99 and ethanol plants would require a $6 billion subsidization to continue operating.

Eight dollar corn. If you don't think that would affect the price of food you eat, you are a fool. This kind of thing would really fuel some inflation in this country. Even if corn prices only rose to $6.50 with no enforcement of the mandates, That's still a lot of money for corn and a lot higher food prices.

Now there is no guarantee that there will be a drought this year. There is also no way of accurately estimating how many acres will be planted to corn so these are just estimates but if you care about the price of food at all, this ought to scare you. Would removal of the mandates reduce prices?

Removal of the $0.51-per-gallon blenders credit would have a large impact on corn markets
only if the EISA mandate were also eliminated. With both eliminated, the average price of
corn would drop by about 22%.

So, weather related disasters could really have a large impact on corn prices with the present environment of mandates for ethanol that the American public desires. I hope we all enjoy the ride.

Converting corn to ethanol in Iowa not only leads to clearing more of the Amazonian rainforest, researchers report in a pair of new studies in Science, but also would do little to slow global warming—and often make it worse.

"Prior analyses made an accounting error," says one study's lead author, Tim Searchinger, an agricultural expert at Princeton University. "There is a huge imbalance between the carbon lost by plowing up a hectare [2.47 acres] of forest or grassland from the benefit you get from biofuels."

Wow, ethanol might make global warming worse? How "green' can you get. How does ethanol make global warming worse? Land use changes.

Tilman and his colleagues examined the overall CO2 released when land use changes occur. Converting the grasslands of the U.S. to grow corn results in excess greenhouse gas emissions of 134 metric tons of CO2 per hectare—a debt that would take 93 years to repay by replacing gasoline with corn-based ethanol. And converting jungles to palm plantations or tropical rainforest to soy fields would take centuries to pay back their carbon debts. "Any biofuel that causes land clearing is likely to increase global warming," says ecologist Joseph Fargione of The Nature Conservancy, lead author of the second study. "It takes decades to centuries to repay the carbon debt that is created from clearing land."

Diverting food crops into fuel production leads to ever more land clearing as well. Ethanol demand in the U.S., for example, has caused some farmers to plant more corn and less soy. This has driven up soy prices causing farmers in Brazil to clear more Amazon rainforest land to plant valuable soy, Searchinger's study notes. Because a soy field contains far less carbon than a rainforest, the greenhouse gas benefit of the original ethanol is wiped out. "Corn-based ethanol, instead of producing a 20 percent savings [in greenhouse gas emissions], nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years," the researchers write. "We can't get to a result with corn ethanol where we can generate greenhouse gas benefits," Searchinger adds.

Now everyone here knows my thoughts on ethanol and food but read on for a scietific take on it.

Turning food into fuel also has the unintended consequence of driving up food prices, reducing the access of the neediest populations to grains and meat. "It's equivalent to saying we will try to reduce greenhouse gases by reducing food consumption," Searchinger says. "Unfortunately, a lot of that comes from the world's poorest people."

"We are converting their food into our fuel," Tilman notes. " The typical driver of an SUV spends as much on fuel in a month as the poorer third of the world spend on food."

Yea, fill that SUV with ethanol and take food from poor people's mouths. Makes you feel real good, doesn't it? So, how does ethanol rate for it's environmental price tag? Right up there with coal-to liquid- fuel.

But the environmental price tag of biofuels now joins the ranks of other, cheaper domestic fuel sources—such as coal-to-liquid fuel—as major sources of globe-warming pollution as well as unintended social consequences. As a result, 10 prominent scientists have written a letter to President Bush and other government leaders urging them to "shape policies to assure that government incentives for biofuels do not increase global warming."

This euphoria over bio-fuels might be a little premature it seems. Maybe there is more of a price tag to it than people think. That is all I have been trying to say all along around here. I really don't have a problem with ethanol and bio-fuels. I just think this massive amount of government subsidies and government targets for usage are a little premature. We don't know all the consequences of what we are attempting and we need to slow down and look this over a little more careful. The poor not having enough food bothers me more than the greenhouse gas stuff but it all is concerning and needs looking at.

More and more people are seeing this and now maybe our government should too. Over in Europe they are begging to question their bio-fuels target.

The European Union is already having second thoughts about its policy aimed at stimulating the production of biofuel. Stavros Dimas, the EU environment commissioner, admitted last month that the EU did not foresee the scale of the environmental problems raised by Europe's target of deriving 10 per cent of its transport fuel from plant material.

It really makes you set back and think a little doesn't it. What's right, fuel from oil or fuel from plants? Which is greener? I really don't know but maybe we should be concentrating on something else. Something like conservation. Maybe we need to think a little more along those lines too. Jumping on new bandwagon like bio-fuels isn't always the answer to our problems.

You can have data without information, but you cannot have information without data. Daniel K. Moran

Wednesday, January 9. 2008

Amazon deforestation and fires are being aggravated by US farm subsidies, claims STRI’s staff scientist William Laurance.

According to Laurance, whose findings are reported this week in Science (December 14), a recent spike in Amazonian fires is being promoted by massive US subsidies that promote American corn production for ethanol. The ethanol is being blended with gasoline as an automobile fuel.

So, the mania for ethanol in this country is also driving rain forest destruction. Then by the same token, they blame everything Americans do for rain forest destruction. Interesting though that our subsidizing of corn and ethanol can have such an effect.

Let the consequences be what they will, I am determined to proceed. James Otis

Saturday, December 15. 2007

Everybody out there knows I am not a big fan of ethanol. Ethanol and bio fuels are in my opinion damaging our food security by turning our food into fuel. We have choices in our life and by filling up our SUV with food, we are driving the price of our food up which damages rich and poor alike throughout the world. That's the way I see it.

A lot of people in the cattle business are worried about ethanol too but for a different reason. The rising price of corn really stands to hurt the cow-calf man. The feeders are getting by because of the distillers grain but the cow-calf man is getting hurt by ethanol. The higher price of grain causes the feeders not to bid as much for the calves which really squeezes the cow-calf man.

I've tried not to let the above thinking cloud my feelings about ethanol. Do I oppose ethanol because of calf prices or because it is driving food prices up? I believe it is mostly because of the food price situation but maybe there is a little bit of self interest in there also. Where is all this leading up to?

I found a couple of interesting opinion pieces today that I wanted to share. The first explores the cattle businesses obsession with the latest energy bill. Yea, the energy bill. I've heard more cattle producers voicing concern about the energy bill than I have about the farm bill because the cattle guys are really scared of the renewable fuel mandates that are in it which is going to drive the price of corn even higher, damaging the cow-calf man. This opinion piece says that maybe the cow-calf man needs to start haunting the halls of Congress with hat in hand like the corn people have done for so long and get a subsidy for our survival. Interesting thought but I'm not to sure I am ready for that drastic of move. I am very concerned over the financial health of the cattle industry and my ranch in particular, begging in the halls of Congress would be a little hard for me.

As rural communities and cattlemen, we should be proud that we're supplying energy to the world, and that cattle can utilize the by-products. While I don't believe ethanol is the permanent answer to replacing energy dependency on foreign oil, it's part of the solution. How high would the price of oil go if we didn't have ethanol to fill the supply gap?

By the way, the October issue of National Geographic had an excellent article on carbon reduction and the true yields of various ethanol substrates used for production.

These factors are forcing a paradigm change in the cattle industry that we must learn to deal with. It is national energy policy and looks to be that way for some time to come.

I am tired of turf protecting the status quo in the cattle industry. As an industry, we should be furious about the lack of world market share we aren't capturing. With the low value of the U.S. dollar, and the cheapest feedstuffs in the world, we should be providing the world with beef.

Instead, we argue over ethanol production. Producer pitted against producer isn't a good thing for the U.S. beef industry. Isn't it time to recognize that things are changing?

Not surprisingly, this opinion is not stated by a cow-calf man, but a feeder and dairy man who is taking advantage of the cheaper ethanol byproducts. Looking beyond that though is there some truth to this? Do we as cattle producers need to figure out how we fit in this new regime instead of fighting it so much? A bigger personal question for me is, am I complaining about ethanol for food security reasons or am I complaining because of it s potential to hurt me as a ranch and business?

I'm not saying I have the answers to these questions. I do believe my concerns about ethanol and our governments continued financial and Legislative support for it are valid for food security reasons. Do we as a society need to keep subsidizing ethanol and corn producers with the prices the way they are? I guess that's my biggest question now. The cow-calf man is going to have to figure out how to fit in this new situation. I don't like it, but that's the truth. How it will all shake out is beyond me.

I will tell you one thing though, the price of beef is not going down any time soon in the grocery stores. If anything only look for prices to be going up as cattle supplies get tighter. I won't go so far to say the cow-calf man took a bath this year in the US, but it wasn't a great financial year. Calf prices were close to last year but the higher cost of fuel and feed really meant that there was more losses in the sector this year. This has really scared a lot of cow-calf people into wondering where we are going, what we are doing. This is really driving the ethanol dilemma in the beef industry, the worries of the cow-calf man.

Our dilemma is that we hate change and love it at the same time; what we really want is for things to remain the same but get better. Sydney J. Harris

Wednesday, December 5. 2007

Now this is really ..... interesting. Part of the whole ethanol boom is the distillers grain that is available after the ethanol is made. This distillers grain has turned into a real boom for the cattle feeding buisness. The cattle feeders might be losing some corn but they are making up for it with the distillers grain. Win, win right?

Wrong.

Early research seems to indicate that the distillers grain increases the amount of E. coli in these animals guts. The amount of E coli in animals fed distillers grain was about twice as much as those that were fed no distillers grain. Whether the E coli is from the distillers grain or the distillers grain just helps it grow better is unknown at this point. Now we are talking a food safety issue though. More E coli in the animals means a higher chance that E coli might be in the finished product. Properly handled meat shouldn't have any E coli in it from such a source but the pace meat is handled in the big meat packing plants sometimes gets contaminated whether they like it or not. So this makes ethanol a food safety issue.

I'm always talking about the food security issues that ethanol has brought up and now we are seeing food safety issues with it too. Ethanol is going to be with us for a long time. I'm not blind to that. But how important is ethanol to you? How should we as a society deal with the food security and food safety issues that ethanol seems to generate? Are the higher food prices and the increased E coli risk worth putting ethanol in your SUV? Are the higher food prices and the increased E coli risk worth subsidizing the ethanol industry with our tax dollars? All tough questions. I don't know that I have the answers to these questions.

Part of the answer might be conservation though. Do you really need that big SUV? Might you get by on a smaller, more fuel efficient vehicle. I went this route with my last vehicle. It isn't the best vehicle for me and my family but the gas mileage made it well worth it to me. More people need to think about conservation. That is part of the long term answer to the energy problems. Ethanol is raising a lot of valid concerns out there in my opinion. How the American people deal with these problems will be very interesting.

Concern for man and his fate must always form the chief interest of all technical endeavors. Never forget this in the midst of your diagrams and equations. Albert Einstein

Tuesday, November 6. 2007

Everybody that has read here for a while knows that I am very concerned that the push the US is seeing into ethanol and biofuels and the subsidies the government is spending on these things are endangering our food security. We have to think about what we are doing by trying to grow our fuel. Is the possibility of not having enough food worth growing our fuel instead of fuel?

Empty shelves in Caracas. Food riots in West Bengal and Mexico. Warnings of hunger in Jamaica, Nepal, the Philippines and sub-Saharan Africa. Soaring prices for basic foods are beginning to lead to political instability, with governments being forced to step in to artificially control the cost of bread, maize, rice and dairy products.

Record world prices for most staple foods have led to 18% food price inflation in China, 13% in Indonesia and Pakistan, and 10% or more in Latin America, Russia and India, according to the UN Food and Agricultural Organisation (FAO). Wheat has doubled in price, maize is nearly 50% higher than a year ago and rice is 20% more expensive, says the UN. Next week the FAO is expected to say that global food reserves are at their lowest in 25 years and that prices will remain high for years.

I don't know if you have noticed but I have definitely seen that my food bill has risen quite a bit in the past few months. Last month I about dropped my teeth at the total price of my food bill and this month looks to be worse yet again. What's the cause of this rise?

The price rises are a result of record oil prices, US farmers switching out of cereals to grow biofuel crops, extreme weather and growing demand from countries India and China, the UN said yesterday.

"There is no one cause but a lot of things are coming together to lead to this. It's hard to separate out the factors," said Ali Gurkan, head of the FAO's Food Outlook programme, yesterday.

Now I have to agree with these reasons. I might really focus in on farmers growing more fuel instead of food in the price rise of food but the other factors they mention are true too. It is hard to figure how much each contributes, but growing fuel is not helping the situation. How might it affect things?

Last year, he said, US farmers distorted the world market for cereals by growing 14m tonnes, or 20% of the whole maize crop, for ethanol for vehicles. This took millions of hectares of land out of food production and nearly doubled the price of maize. Mr Bush this year called for steep rises in ethanol production as part of plans to reduce petrol demand by 20% by 2017.

Maize is a staple food in many countries which import from the US, including Japan, Egypt, and Mexico. US exports are 70% of the world total, and are used widely for animal feed. The shortages have disrupted livestock and poultry industries worldwide.

"The use of food as a source of fuel may have serious implications for the demand for food if the expansion of biofuels continues," said a spokesman for the International Monetary Fund last week.

The outlook is widely expected to worsen as agro-industries prepare to switch to highly profitable biofuels. according to Grain, a Barcelona-based food resources group. Its research suggests that the Indian government is committed to planting 14m hectares (35m acres) of land with jatropha, an exotic bush from which biodiesel can be manufactured. Brazil intends to grow 120m hectares for biofuels, and Africa as much as 400m hectares in the next few years. Much of the growth, the countries say, would be on unproductive land, but many millions of people are expected to be forced off the land.

All ready the corn used for ethanol in this country is affecting food supplies throughout the world and the expansion the Government wants will cause even more problems. I know the food shortages will affect poorer countries before it affects the US, but it still concerns me.

I always like to think I grow food to feed people. I don't really care where the people live, I just think it is important to feed people. I know everybody out there thinks I'm crazy for worrying so about growing fuel instead of food and my concerns on food security but read the article and it really makes you wonder. How many people in the world are going to go hungry because you want to put a little ethanol in your SUV instead of gas? Do you think about this at all? I think it's something we need to consider instead of continuing to expand our ethanol industries. Is starving people worth putting ethanol in your SUV or is driving a more fuel efficient vehicle and not traveling as much a better idea so food is more affordable. Tough call ain't it.

The most excellent and divine counsel, the best and most profitable advertisement of all others, but the least practiced, is to study and learn how to know ourselves. This is the foundation of wisdom and the highway to whatever is good. Pierre Charron

Saturday, October 27. 2007

Here is a real interesting story about ethanol and some problems that are developing in the whole ethanol is our savior myth.

However, there are problems developing in the marketplace. Supply chain problems and rising costs are hampering growth in the industry despite an ethanol production subsidy and a federal mandate requiring increased usage of ethanol. There is trouble ahead for companies involved in ethanol production. Several recent studies have poked holes in what many had hoped was the answer to the U.S. reliance on foreign oil, which last week was nearing $90 a barrel. However, according to recent studies, including one released earlier this year by University of Minnesota (UM) researchers and a Congressional Research Service (CRS) Report, there may be more potential risk ahead for the industry.

“We definitely believe that biofuels have a significant potential,” said Jason Hill, lead author of the UM study. But he added that ethanol should not be viewed as “a savior” to our energy problems and its rapid expansion as a motor fuel has its drawbacks, especially if it is dependent on food crops such as corn and soybeans as feedstock.

Now I'm not going to link back to what I've said before, but what has always been my concern with the booming ethanol industry? Food security I call it. By converting our food into fuel we are hurting the food security of the United States. Other people are starting to see this now.

If every acre of corn were used for ethanol, it would replace only 12.3 percent of the gasoline used in this country, Hill’s study said, adding that the energy gains of corn-produced ethanol are only modest and the environmental impacts significant.

As a fuel source, ethanol, which produces just 25 percent more energy than it requires to make it—is inferior to feedstocks such as sugar cane which is as much as 400 percent more efficient.

It also widely believed by the public that ethanol presents a environmentally friendly option to fossil fuels, however, both the Minnesota and CRS studies found that increased corn production causes the release of nitrogen, phosphorous and pesticides into waterways as runoff from fields. In addition, ethanol, especially at higher concentrations in gasoline, also produces more smog-causing pollutants than gasoline per unit of energy burned, the researchers said. In fact, in terms of alternative fuels, experts point out that biodiesel represents a far better fuel choice than corn- based ethanol.

Twelve percent. That's how much gas ethanol would replace if every corn acre in America were converted to ethanol. People call this energy security? This is producing all our energy at home? If we were to convert all our corn to fuel, what the hell would you eat? Have you people seen how much of our food depends on corn products of one kind or another? This is what I mean by food security. We are endangering Americas food security by turning our food and cropland into food.

Now I know some wise ass out there will tell me that switch grass and straw can be made into ethanol. Theoretically, yes it can but it has not been done on a commercial scale yet and is still in the research stage. Kind of like fusion power is in research stage. Technically possible but they haven't figured out how to do it yet so let's not bank on cellulosic ethanol yet. It's not here yet.

I am not opposed to ethanol. I just think it needs to be approached with more caution. Ethanol is not the solution to our energy problems and the greenhouse gas problems. Ethanol also endangers America food security by diverting land from food production to fuel production. These things all need to be considered instead of just running willy nilly head first into a "solution" that just creates more problems. But getting people to look before they leap is just impossible now days.

Hope is a great falsifier. Let good judgment keep her in check. Baltasar Gracian

Monday, June 18. 2007

A push from Congress and the White House for huge increases in biofuels, such as ethanol, is prompting the oil industry to scale back its plans for refinery expansions. That could keep gasoline prices high, possibly for years to come.

With President Bush calling for a 20 percent drop in gasoline use and the Senate now debating legislation for huge increases in ethanol production, oil companies see growing uncertainty about future gasoline demand and little need to expand refineries or build new ones.

All this talk about increasing biofuels now becomes more important. Refineries are running at full capacity now so any increase in energy usage is going to have to come from biofuels. Are they up to it? Congress and the President can call for increases in usage of biofuels all they want, but that doesn't mean it is going to happen. Lust like they can pass a law that says pi=3.14 instead of 3.14159265..... but that doesn't give the right answers.

All along with the high fuel prices we have been hearing that with more refining capacity the prices would moderate a little and things would be fine again. Now that looks bleak and the prices we are seeing now might be the low ones while biofuels try to struggle to fill the gap. Don't get me wrong, nothing remains static, and eventually gas prices will drive high enough that some refiner will build more capacity to take advantage of the high prices and break the logjam and get more refining capacity built. We will have to suffer through some pretty high prices before that happens though since expansion of refineries is a long term thing and can't happen overnight.

This is a perfect example of what I mean by words have meaning. All these politicians spouting their Utopian ideals about how much energy they want from biofuels is causing a reaction that in the long run might hurt us all. Maybe the biofuels industry can meet the goals the politicians are setting but I don't know. I've just seen too many times the politicians set a goal and then it turns out not to be as feasible as they thought. Fusion power and hydrogen car are just a couple of examples and it wouldn't surprise me if the savior of the biofuels movement, cellulistic ethanol production, falls in the same category, promising but unachievable. In the meantime while this whole plays out, prepare for high prices at the pump. They are going to be here for a long time.

If language did not affect behavior, it could have no meaning. Kenneth L. Pike

P.S. I know somebody is going to spout some garbage about the oil companies don't want to build refining capacity because they will make more money. Leave it at home and learn a little bit more about the business world. I don't want to hear it.

Monday, June 11. 2007

Say all you want about historically high cattle prices, the longest sustained period of cow-calf profitability on record, robust consumer beef demand and the growing seasonal prospects for more grass and forage.

"We didn't expand the herd last year, we won't this year, and I don't believe we'll grow it to any degree for the next several years," says Bill Helming, of Bill Helming Consulting Services at Olathe, KS.

Net economics appear to be the growing reason.

I had come to the same conclusion myself about the Cattle herd. I can't say I used the same thought process but it just seemed to make sense to me.

As usual the biggest factor in the thoughts on this is corn prices. With ethanol sucking up so much corn the cost of feed will be a limiting factor on prices and herd expansion. There is not the pressure to expand the herd size since there is so much uncertainty about the availability and price of corn. Between the corn and the droughts we have been experiencing producers are unsure if they have the feed resources for expansion. I am going to have more feed than I need with the rain this spring but does that mean I should try to expand? What's going to happen next year with the weather? I might drought out big time and ruin my plans. The uncertainty of feed is a big factor.

The author of the article believes that beef demand will stay good and consumers are willing to pay the higher prices for beef. There is plenty of feedlot space so for cow-calf producer prices should remain steady if we don't expand the herd too much.

I wonder sometimes too if the producers don't know that they will hurt themselves by expanding the herd. They will be punished with lower prices so hey are careful not to push too hard on keeping heifers. Would producers act in such a way to benefit their interests or would it be more normal to try to expand and cash in more money? Classic economics would indicate that producers would expand the herd to bring in more money driving prices down in the long run. Looking beyond that though, producers could also be squeezed by the rising costs of all inputs, like fuel, and need to continue to sell all the calves they can to make ends meet.

Whatever the reasons, I agree with this economist, calf prices should be decent this year and I don't see much in the way of herd expansion. It's just a feeling for me so we will see. It keeps things interesting.

Often undecided whether to desert a sinking ship for one that might not float, he would make up his mind to sit on the wharf for a day. Lord Beaverbrook

Sunday, May 20. 2007

I had a discussion a while ago about ethanol and Distillers Grain and the cattle feeding industry moving north. My basic contention was that the ethanol plants will either find a way to ship the distillers grain to feedlots where they are presently at or the ethanol plants will move to the feedlot areas so they have a market for the distillers grain instead of the feeding industry moving north. I'm not the only one thinking that way (emphasis added).

However, though Iowa has lots of pigs, distillers' grains work much better as feed for beef and dairy cows. And, according to researchers at Iowa State University, the state's refineries already churn out more than five times as much of the stuff as its small stock of dairy cattle can eat. Most of those refineries, therefore, have to use a great deal of energy drying the distillers' grains so that they can be shipped to Texas and other cattle states in the South.

Feeding the by-product directly to local animals would cut energy use at the refineries and transport costs for the feed. Iowans and other Midwesterners think this logic will drive a boom in the region's beef and dairy industries. Plenty of investors, however, view it as an excellent reason to start building ethanol refineries in Texas, which has plenty of hungry cattle.

I'm not saying there won't be some cattle feeding moving north but I don't see a big movement and I'm not the only one. It's nice to know once in a while that either,

a. I see the world as other people do or,

b. There are other people in the world just as stupid as this ignorant cowboy.

Tuesday, May 1. 2007

I've been somewhat curious about Distillers Grain, leftover product from ethanol production, and the feeding of it to livestock. The claims I read are how wonderful it is to feed to cattle. I know nothing about it and probably will never feed it since I don't feed anything in a bunk, it's all open range around here, but knowing how its fed helps in understanding.

Keeping this in mind the story I read about how Distillers Grain can cause polio in cattle was very interesting. It appears the sulfur content of the Distillers Grain can be high enough to trigger acute polio which gives some symptoms similar to BSE.

I'm sure this is a very rare thing that can happen when feeding Distillers Grain but it is interesting to know. I knew there had to be catches to feeding Distillers Grain and here is one of them, sulfur content. What other problems are we going to find with this feed source? Maybe there are some and maybe not. We won't know until we feed enough to find out.

Maybe I am to old fashioned but I am always leery of new things until they have proven themselves out. Hell, I just got into big bale systems last year because it looked like they were working good and had been around long enough to prove their worth. I know Distillers Grains of many different types aren't a new thing, but the large scale feeding of it because of the ethanol boon is, so I am approaching the whole thing with caution looking for the problems it causes and the solutions it brings. I never imagined polio was one of the problems but you learn something new everyday.

Just as a cautious businessman avoids investing all his capital in one concern, so wisdom would probably admonish us also not to anticipate all our happiness from one quarter alone. Sigmund Freud

Monday, April 16. 2007

I had a comment left by my buddy at MSU, Paul, and I decided to answer it here instead of the comments.

Here's the comment to start with.

This corn thing is all hype to drive down the prices we get for our calves this year. After processing the corn in the ethanol plants, approximately 70% of processed corn is left over and can be fed to cattle. This "mash" will begin to pile up and I would think that this should become cheap feed for feedlot operations. This should result in the movement of feedlots from Texas to Nebraska, Dakotas, Iowa, etc. Will this happen, this remains to be seen. This should be good for Montana calves.
When I was a kid during the '50's we fed "mash" from the beer breweries to the milk cows. This was cheap fed and lasted until the beer companies moved out. It seems to me that some folks are just out to make a buck at the expense of anybody. I am looking forward to good calf prices this year. We sell on Superior every year and usually get top dollar for our calves. It is all a matter of timing. I would like to hear your comments on this "mash" issue which nobody is talking about. Short of the feedlots being very close to the ethanol plants, someone is going to have to find a way to process this "mash" into pellets or something so that it can be shipped. Obviously the closer the better, hence watch for more feedlots in the North.

This corn thing is all hype to drive down calf prices? I don't think so. There is real pressure on the corn markets with the rise in the ethanol business. This cannot be denied. I personally think that the market is a little over speculated, to many people betting the market will go higher yet, and there are some indications that this is true. I heard a report on the radio that the year end corn stocks were significantly higher than expected and they were thinking that ethanol wasn't sucking up as much corn as people thought. I personally think that other users of corn, mostly the livestock industry, are finding ways to do with out as much corn since the prices are higher, the law of supply and demand doing its thing, and that is why there is more corn left than expected.

Now what Paul means by "70% of processed corn is left over," I am not exactly sure. I do know that when they are done making ethanol they have distillers grain, mash as Paul puts it, left over. Distillers grain can be fed very efficiently to cattle but not so to hogs and poultry. Since we can feed corn to cattle hogs and poultry very easily, there has to be something significantly different about distillers grain since it is so hard to feed to hogs and poultry. Therefore distillers grain is not 70% corn, and I'm not sure it has 70% of the feed value of corn so I'm not sure what Paul means.

Distillers grain is a wet product that does not conduct itself to long distance transportation. There are a few plants that make Dry Distillers Grain which is, as the name indicates, distillers grain that is dried so it is a dry product. This dry product is easily transported and shipped using existing transportation assets unlike distillers grain. Since distillers grain is so easily feed able to cattle, that is where most of it is going. The problem here is most of the big cattle feeding areas are not in the same area as the corn producing areas where ethanol is being produced. The question becomes, what is going to happen to the distillers grain?

I've heard reports but have been unable to prove them that there has been some effort in Iowa, a big ethanol state, to open up new cattle feedlots since there is not much cattle feeding in Iowa anymore, mostly hogs are fed there now. The problem is that the Iowa Department of Environmental Quality will not approve of any new cattle feedlots to be built. This leads to a growing distillers grain problems in Iowa and other states. Will we see more cattle feeding going on in Northern states as Paul speculates? I personally don't think we will see any large movement of feeding back to northern states. They will either figure out how to ship distillers grain to where it can be used or they will start drying more of it and shipping it out. The advantages of feeding where they do now far out weigh the distillers grain issue. Hell, it wouldn't surprise me if the mounting problem of distillers grain drives more ethanol plants to the feeding states and they will ship corn into them as cheaper than trying to deal with the distillers grain in the northern states. My opinion but who knows.

This whole corn price issue has yet to shake out. How it will ultimately affect not only the livestock industry, but most of the food production in the US has yet to be figured out. There are a lot of experts throwing out predictions but it's a lot of hot air. Hindsight is 20/20. We will know once the system has finally stabilized from tall the shocks going through the system now. Hell, who would have predicted with higher corn prices, calf prices would stay as good as they have? Nobody predicted that but now that we see the trends it makes sense to us. Beef demand is staying strong, feeders aren't feeding as much corn to get the critters to fat and are slaughtering the cattle at lighter weights but still maintaining there profitability. This has led to a demand for calves that I would have never expected with corn prices as high as they are. The market is making adjustments and figuring things out. That's all you can ask for. It's not hype out to screw the cow-calf man out of money, it's the market at work, like it or lump it.

So in short, I disagree with Paul that some mysterious entity is driving corn prices up to get calves cheaper. I also disagree with him that there will be a large movement of cattle feeding to northern states because of the "mash" from ethanol production. There might be a slight movement but nothing big, the market will find a way to efficiently handle the distillers grain issue if the government doesn't intrude and muck it up. I take a neutral view on the distillers grain being "70% of processed corn is left over" since I just don't know what the nutritional value of distillers grain is. I see where a lot of research is going into how to efficiently feed distillers grain but I am not conversant with it. The only statement he has that I agree with is " I am looking forward to good calf prices this year. " I don't expect it to be quite as good as last year but they will maintain themselves well and an efficient producer will be able to make a little money if Mother Nature will just cooperate a little. I hope you enjoyed my answers Paul. I've tried to cover all the bases but I may have left something out.

There ain't no answer. There ain't gonna be any answer. There never has been an answer. That's the answer. Gertrude Stein

Friday, April 13. 2007

It appears that the US cattle herd is not expanding at the present time. This can be seen because female slaughter is keeping pace with steer slaughter which is a strong indicator that the US herd is remaining steady.

This is really good news because we have had a few good years, marketing wise, in a row now and usually that would cause the herd to expand so producers can take advantage of the situation. It's not happening this time for a lot of factors. The two biggest ones being the weather and ethanol.

There has been enough weather disasters that have hurt cattle producers in the past couple of years, hurricanes, drought, blizzards, that while some producers in favored areas might be trying to expand, those in the areas affected are liquidating there herds so we are keeping steady pace.

The other factor, ethanol, is easy to figure. People are just unsure what corn prices are going to look like and if there will be affordable corn to feed cattle in another year. Corn planting news out of the Midwest supports this. They are planning on planting more corn, but the weather is not cooperating and there is worries whether they will be able to get all they want planted to supply all the needs that are being demanded by the corn markets.

As usual we will have to wait and see but I'm sure glad there is no expansion going on. That really drives prices down for producers and makes life tough. Things are tough enough around here without that worry around my neck.

Don't limit yourself. Many people limit themselves to what they think they can do. You can go as far as your mind lets you. What you believe, remember, you can achieve. Mary Kay Ash